MEMORANDUM TO: CC: FROM: DATE: RE: Kevin D. Thomas, Ph.D.

Samantha Marx Wheel of Seven April 5, 2012 TCB #2 - Case 10.1 Business Suites (C)

PROBLEM: Given the vast expense associated with BusinesSuites (BSS) current marketing tactics such as the Broker Referral Fee and Broker Tour programs, what is the most viable, cost-effective sales promotion strategy that would differentiate BusinesSuites from its competitors and generate new business? SYMPTOMS: (1) Real estate market competition (2) economy (3) broker saturation CRITICAL FACTORS: (1) Objectives (a) expand clientele (b) increase overall revenue by 8% (2) Total budget for all marketing efforts-$432,541 (a) broker commissions/referrals$82,847 (b) client goodwill and promotions-$61,685 (c) advertising and marketing$288,009 (3) Commercial real estate brokers as significant potential source of new, regular office clients (a) middle-aged (b) area resident- familiar with area (c) several years of broker experience (4) Promotional offers to brokers - (a) broker referral fee program (b) broker tour program. (5) Current BSS marketing efforts: client goodwill and promotions, direct mail, pay-perclick advertising, referrals, billboards, print advertising in business publications, etc... (6) BSS was projected to have total revenue of approximately $14,500,000 a) office rentals accounted for 78% b) services accounted for 22% c) 10.2% of total revenue was from VO clients (7) Industry Competition: Price point that is 25% less than BSS in terms of revenue per occupied office (8) Current clientele: 1,188 clients - (a) 589 regular office clients; 599 VO clients (9) Company Size and Locations - (a) 4 centers in Maryland; 7 centers in Texas; 2 centers in Virginia; 1 center in Nevada. (b) 829 tangible offices available amongst the total 14 locations. (10) BSS Brand Image: The Freedom to Succeed. ALTERNATIVES: ALTERNATIVE 1: Brokers are to be commissioned on a sliding scale, dependent on their level of signees. The scale is built up throughout the fiscal year, and starts over at the beginning of the next year. Since BSS is offering a higher commission, they should omit the $50 incentive, and employ an email marketing campaign to notify brokers about the office space. PRO: (1) Elimination of $50 saves overhead cost (2, 4). (2) Brokers are motivated to sell more in order to earn a higher commission (3, 4). (3) Could help increase

occupancy to maximum potential (1, 6, 8, 9). CON:(1) Sliding scale could get expensive, as big firms would likely dominate the sales and earn a very high percentage commission. Could deter independent brokers from participating (3, 4). (2) Elimination of the $50 incentive could reduce number of brokers who have knowledge of BSS (1, 3, 4, 5, 10). (3)Focus on price undermines brand equity (4,5,6,7,10). (4) Competitors could implement higher commission scale (4, 5, 7). ALTERNATIVE 2: Change marketing strategy: re-allotment of the commission. We would keep the $1,000 commission for the brokers and create an incentive for new tenants by giving them a $1,000.00 credit on their first month expenses. PRO: (1) This combined pull and push sales promotion effort could help maximize ROI (1, 2, 5, 6). (2) Motivates tenants to sign with BSS (1, 6, 7, 8, 9). (3) Appealing for a broader audience: tenants and brokers (1, 3, 8,). (4) Aligns with BSS past marketing efforts (1, 5). CON: (1) Using price as an incentive can diminish brand value (5, 7, 10). (2) This option is more expensive than past efforts (2, 4, 5). (3) Compensation of client may upset broker (2, 3, 4, 5, 6). (4) Current clients may request a similar compensation, and could look into using competitors services (2, 4, 5, 6, 7, 8). ALTERNATIVE 3: Implement a company-wide contest which awards brokers for reaching specified levels of sales and outstanding performance of filling office space. In addition to 3% commission on leases, the highest performing broker each year has a choice between an Alaskan Cruise, an all-inclusive Hawaiian resort, or a California Wine Tour for up to four members. An email marketing campaign will advertise the contest. PRO: (1) Contests stimulate sales that would not have occurred in their absence (1, 4, 5, 6) . (2) Is an engaging, cost-effective way to increase performance because it eliminates the need for monetary incentives from tours (1, 2, 4, 5). (3) Easily measurable results (1, 4, 5, 9). (4) Encourages brokers to compete with one another for a family-friendly incentive (3, 4, 5). (5) Email marketing is a highly effective means of communication, especially for notifying our brokers of the contest (1, 2, 4, 5). CON: (1) Sales promotions may not stimulate repeat purchases after the promotion has ended (1,4,7,8). (2) This incentive may not be enough to stimulate an increase in contracts (1, 4, 5, 6). (3) Sales promotional devices do not focus on stirring brand loyalty (5, 7, 10). (4) By attracting only brokers for this contest, BSS is not appealing to tenants; has the potential to alienate others (1, 3, 4, 5). (5) In time, implementing this contest companywide is costly (1, 2, 4, 5). (4) RECOMMENDATION: Alternative 3: Company-wide contest; email marketing and cost-per-click campaigns. The main objective for this approach is to increase office space occupancy to a rate of 75%. This will be achieved by incentivizing our target market of brokers with sales promotion tactics. Additionally, BSS will stimulate a conversation around their company and their locations as the national contest goes underway. The contest will be announced via email marketing campaigns targeted directly to regional brokers and firms in all the city locations of BSS. According to Vertical Response Marketing, email marketing is trending upward with click and open rates increasing and in some cases

rates at 30% higher than other tactics. Email marketing is a low-cost and sure means to instill brand knowledge about BSS and their promotional means of engagement. Moreover, in regard to the purpose behind an incentive-based contest to stimulate leasing, we consider a contest to be a performance based goal orientation, which leads those engaging in it to work more diligently. According to a study in the Journal of Marketing: A performance goal orients [salespeople] to achieve a positive evaluation of their current abilities and performance from important others. Basically, this study substantiates the fact that by offering the brokers a goal to work toward, in this case the opportunity of winning the vacation getaway contest, BSS will have a higher turnout. It will drive brokers to work harder and smarter in order to achieve their goal. Further, a study by Carnegie Mellon University on the effects of contests and sweepstakes states that if contestants are risk-neutral, then the contest must utilize a value-maximizing award, such as a single grand prize, whereas if the current users are risk-averse, then the award should consist of multiple "large" prizes. Our target of brokers, by their very nature, take on huge amounts of risk as dictated by their commission-based career and would be more inclined to want to work toward the larger, exclusive grand prize. In addition to this, recognizing the BSS contest winner on the National Association of Realtors website is another option to consider as a means of enticing realtors to participate in the contest. (5) ADDITIONAL COMMENTS: According to Table 10.1.1, both Year 1 and Year 2 had lead-to-win conversion rates of 13.7%. This does not include tour statistics. If we assume that there is no overlap between the lead counts and tour counts columns, and incorporate both, then the total lead-to-win conversions would be 7.5% for year 1, and 6.1% for year 2. This means that despite the fact that there were 170 more leads in the second year, BSSs ability to convert those leads into new business actually declined. Based on the BusinesSuites(A) case study, 15% of the advertising and marketing budget of $288,009 is spent on direct mail. This number tallies up to $43,201.35. According to the same study, less than 5% of the total value of new business actually comes from direct mail sent to these potential clients. Even though direct, personalized mail has proven effective for other companies, this statistic does not represent a good return on BSSs advertising dollars, which is why we chose to discontinue the use of direct mail. This is money that can be allocated toward other successful investments such as pay-per-click campaigns and SEO, which, in the process, may allow for a potential rise in new business from online brokers and referral services as well. PPC has already proven itself valuable to generating new business, so investing even more money in online advertising is the best way to inform brokers of BusinesSuites new promotions, including contests.

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